Disability dynamics, care home admissions, and mortality: evidence form two national English studies to support insurance product development

Social and demographic trends in the UK point out an ageing population and declining availability of family carers, leading to increase in the need for formal care. In England, formal care can be costly and may oblige an older person to sell her or his home. Designing a financial product to cover these costs requires an understanding of the complex underlying risks of longevity and disability. In this thesis, data from two English surveys are used to analyse these risks. Data on subjects in the English Longitudinal Study of Ageing (ELSA), who are interviewed biennially, are used to estimate Cox proportional hazards models using two alternative approaches. Initially the baseline values are used for all predictors. This corresponds to the most likely situation for insurance companies when they set premiums. Subsequently the value of predictors, such as disability levels, can change over time. ELSA is then used to analyse changes in disability that sample members experienced. Results show that disability is not a static process, improvement and recovery are both possible and mortality can be predicted better if changes in health and disability can be taken into account. Therefore, the insurer may offer incentive for after sale reporting of health events that impact on care needs and carry on regular assessments of claimants disability levels. Data from the Cognitive Functioning and Ageing Study (MRC CFAS I) is used to examine how mortality is affected by the onset of disability or entry to care homes. Both onset of disability and care home entry are found to reduce life expectancy. This offers the possibility of annuities whose payments increase following onset of disability or care home entr